On November 9th the BCTGM organized a company-wide workers strike, taking 24 Hostess production facilities offline until management proposed a new arrangement. One week later, talks having made little progress, Hostess filed for bankruptcy protection, and is planning to close 36 bakeries, 242 depots, 216 retail stores, and 311 hybrid depot-store facilities. The move would leave nearly all of it 18,500 employees unemployed, while 19 senior managers would recieve a total of $1.75 million in compensation after the dissolution of the company. The judge presiding over the case, Robert Drain, denied Hostess' bankruptcy motion, instead urging mediation with BCTGM in the interest of, "giving the union as well as the debtors and their lenders a last chance to try and work those issues out in private". As of yesterday, no agreement has been reached, and Hostess plans to continue with its move to liquidation.
The Cream Filling
But the greater issue at hand, is why Hostess is liquidating instead of making a deal? And what sort of response is closing up shop when employees ask to maintain their lowered wages, health and pension benefits? The company's decision makes even less sense considering the costs of closing amount to $70.4 million between closing its various corporate offices, retail stores, and production facilities. Instead of coming to an agreement with people who have already shown a willingness to compromise, Hostess would rather spend millions to eliminate tens of thousands of jobs and sell itself to the highest bidder.
This whole thing makes you want to ask, "is that how you really feel?", because a company willing to go bankrupt rather than improve its business and pay its workers speaks volumes. Sure, Hostess has a host of financial difficulties with mounting debts and brands that are the enemies of a culture cutting out carb-laden snack foods, but it's also been poorly managed. Prior to its first bankruptcy filing in 2004 Hostess, then a blending of Interstate Bakeries and Continental Baking, acquired four different bread companies and attempted to merge the operating paradigms under one umbrella. They failed dismally, because the success of snack cakes couldn't be translated into bread making, and the revival of dieting plans like the Atkins Diet only complicated the company's existing concerns.
Article comments
1 - Dr Dreadful
Unions don't make the decision to go on strike lightly, especially nowadays when in most states there are laws mandating a vote of members before a strike is declared. For workers, a strike means lost pay and hardship with no guarantee that their wages and working conditions will improve in the long term.
From all that I've read, I can't see that the BCTGM acted unreasonably or rapaciously in this case, whereas there is plenty of evidence to suggest that Hostess's downfall came about through long-term mismanagement.
The bottom line is that it is management that is ultimately responsible for the running of a business. If you agree to a deal with a union knowing that it will be unworkable, that too is mismanagement. You hardly then have the moral grounds to turn round and blame the union when the company fails.
2 - Alexander J Smith III
-Dr Dreadful
Now I agree with you completely here, and I couldn't find any solid evidence to suggest that liquidating the company was the only option Hostess had at the time. IN particular, management's decision seemed strange in the face of the workers only asking to retain their pay and benefit contributions at the levels where they were because the Union wasn't asking for increases. Hostess could have made a deal but chose not to and I think that says a lot about the relationship between labor and management in U.S. firms.
3 - Igor
The executives are doing exactly what their plan calls for: liquidate the company and take the assets as booty.
There's no mystery about this at all. And it's happening all over America in every industry: execs are managing the companies into deep problems and declaring bankruptcy as soon as possible. Then, they claim the liquidated asets as soon as possible to get the highest yield for the least time and effort.
Federal corporate law allows them to cash in pension funds and healthcare funds as they wish, unless controlled by unions (those damn busybodies!)
It's a scam, pure and simple. Trillions of dollars in company assets across America are on the chopping block.
The execs have NO interest in saving the company. For them, personally, their best return is to crash the company. They'll get the assets, both as 'retention' bonuses and as stockholders (by this time they've converted all their common stocks from the ESO to Preferred stocks so they're first in line at the bankruptcy payout window.
It's a scam, plain and simple. A quick killing. And it's spreading across the American business world like a plague of locusts.
There is NO good business reason for this corporation to fail. They make a popular retail product and they OWN the most valuable properties in the grocery business: the quick food shelves in the grocery and convenience stores. Salesmen for competitors would kill for those properties. More valuable per linear inch than mansion lots in the Hamptons! More expensive than ocean front lots in Malibu or Biarritz or the Riviera!
Scam, folks! That's spelled S-C-A-M. SCAM!.
4 - Igor
What the execs at Hostess did to employees is called "betrayal without remedy".